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Australian dollar down but to remain supported
Published on 23.05.2018 07:27

After Breaking through the US76c mark in yesterday’s trading session the Australian dollar has pulled back against its US counterpart as doubts surfaced over a planned meeting next month between the leaders of the US and North Korea.

Riskier currencies were sold off across the board after comments by US President Donald Trump yesterday that a planned summit in Singapore next month with North Korean President Kim Jong-Un might not go ahead.

Speculation is rife that Jong-Un will not be willing to give the commitment to give up his nuclear weapons during the meeting which is one of Trump’s preconditions.

“I don’t want to waste a lot of time and I’m sure he doesn’t want to waste a lot of time,” Trump said. "There are certain conditions that we want and I think we'll get those conditions and if we don't we don't have the meeting.

“So there’s a very substantial chance it won’t work out and that’s OK. That doesn’t mean it won’t work out over a period of time.” He added.

Some predict that the fall in the Australian dollar is temporary against the greenback and the US dollar may have run its course for the time being.

One analyst sites the US tax cuts that were introduced in the US may start to take effect in the coming months which will see consumers flood the market with dollars and create an oversupply as well as the chance that future rate hikes from the Fed this year are already priced into the market.

"The forces pushing AUD/USD down in March and April have faded," says Elias Haddad, a senior FX strategist at Commonwealth Bank of Australia.

"In our view the fundamentals for AUD remain solid. Consequently, we expect AUD to consolidate in the 0.7400-0.7600 region in coming weeks and end 2018 high at 0.7800,"he added.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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